By Tiernan Ray

Shares of chip maker Broadcom (BRCM) today closed up 55 cents, or 1.9%, at $29.76, after the company last night reported Q4 revenue and earnings per share that topped analysts’ estimates, and a revenue outlook for this quarter slightly below consensus.

Following the report, R.W. Baird’s Tristan Gerra, who has an Outperform rating on the shares, and a $35 price target, this afternoon offered up some tidbits gleaned from the company’s 10-K filing with the SEC:

Samsung [Electronics (005930KS), Broadcom's top customer, generated 21.3% of revenues in 2013, up from 17.3% in 2012 and 10.0% in 2011 [...] Apple (AAPL) generated 13.3% of revenues during the year, versus 14.6% in 2012 and 13.1% in 2011 [...] R&D as a percent of revenue increased to 29.9%, up from 29.0% in 2012 [...] The 3.0% YoY increase in Broadband Communications revenue was primarily driven by higher sales of set-top box products, partially offset by lower sales of digital TV, Blu-ray Disc, and broadband modem products [...] The 2.9% YoY increase in Mobile & Wireless revenue was mainly driven by higher sales of wireless connectivity products and cellular SoCs, partially offset by lower sales of discrete multimedia coprocessor products [...] The 12.1% YoY increase in Infrastructure & Networking revenue was primarily driven by higher sales of Ethernet switches, PHYs and controllers, as well as communication processor and wireless infrastructure.

Elsewhere, bulls were trumpeting what they viewed as increasing dominance in selling chips for network switching equipment, and a potential payoff in mobile chips from the company’s baseband processors, which it is challenging the reigning heavyweight, Qualcomm (QCOM). Bears, however, believe success in mobile continues to be a wait-and-see matter.

There were scattered instances of price target increases, and some minor adjustments to estimates.

Bullish!

Stacy Rasgon, Bernstein Research: Reiterates an Outperform rating, and a $33 price target. “Gross margin guidance was the one disappointment on the call. It is apparent that pricing and margins in the residual 3G cellular business are reaching extremely low levels. However, this also suggests a potential tailwind as 4G revenues pick up in the second half. On the surface, Broadcom should have had a margin tailwind, as they are guiding their wireless business down more than the others. However, margins are set to fall by 50-100 bps, due to mix within the wireless business itself, mostly due to the company’s residual 3G cellular business. This suggests that 3G pricing and margins, which have been the primary cause of baseband disappointment over the last few quarters, are continuing along a steep downward trajectory (and indeed, must be reaching extremely low levels). However, this does open up the possibility of a margin tailwind assuming Broadcom’s 4G business ramps in the second half. While the jury is still out (one has to wonder what pricing over the long term will look like), at least for now the company indicated that their lowest-priced 4G offering has an ASP higher than their most expensive 3G offering. Certainly something to watch for as we move through the year.”

Bobby Burleson, Canaccord Genuity: Reiterates a Buy rating, and a $35 price target. “Although BRCM is treated as a wireless play, we note that roughly half of the company’s revenues remain outside of that vertical and these differentiating businesses are showing strong performance. Infrastructure and Networking, a higher operating margin segment for the company, delivered upside to consensus expectations at $576M vs. $561M according to Factset. Similarly, broadband showed upside with $548M vs. $531M. Of course, BRCM’s largest vertical is Mobile and Wireless at almost half of total company revenue. Here, BRCM delivered some upside as well ($940M vs. $921M), and we expect that to continue as platform solutions ramp in new design wins. Consistent with the investor focus on this business, we believe MWC will be a positive catalyst for BRCM as the company should be able to demonstrate strong design win traction at the show, boosting investor confidence in momentum for Mobile and Wireless through the remainder of 2014 [...] While guidance is slightly below consensus, we expect upside from mobile and wireless platform solutions on continuing design win momentum and new phone launches. We expect MWC to be a positive catalyst for the shares.”

Romit Shah, Nomura Equity Research: Reiterates a Buy rating, and a $33 price target. “Broadcom is already shipping dual-core LTE SoC to Samsung and expects to start sampling quad-core SoC in 1H and advanced LTE thin modem in early 2H. The company indicated that it has design wins at multiple OEMs. The company also expects to get better ASPs on WiFi from adoption of 802.11ac in smartphone this year. We believe the Mobile World Congress event next month could be a catalyst for the stock, where the company may announce additional design wins or OEM customers. While Broadcom is already shipping LTE chips, a meaningful LTE ramp won’t materialize until 2H14. We estimate that LTE SoC shipments would contribute around $180-200m in 2014. We are estimating total baseband revenue of around $800m for CY14 (including 3G). The company expects connectivity to grow in 2014 despite increasing competition from Qualcomm and Marvell and slower growth in the high-end smartphones.”

Quinn Bolton, Needham & Co.: Reiterates a Buy rating, and a $33 price target. “Notably, the data center business increased 50%+ Y/Y and now accounts for ~1/3 of Infrastructure sales. Demand for the Trident II switch solution remains robust [...] After announcing its first LTE design win at\ analyst day, BRCM is now shipping its Cat4 dual-core LTE SoC. The company remains on track to sample its quad-core LTE SoC during 1H14 and its Cat6 LTE-A thin modem in mid-2014. Importantly, management stated the company now has multiple LTE design wins across multiple customers.”

Christopher Rolland, FBR & Co.: Reiterates an Outperform rating, and a $34 price target. “While there was much to like, there was another side of the coin, as we note operating margins for mobile have fallen from double digits historically to mid single digits. While this should improve (as the segment is currently bearing costs from the Renesas acquisition with little contributing revenue), we still think there is an off chance it may dip into negative territory next quarter. While we have always believed enterprise networking profits could be 2x (or even 3x) that of mobile, we did not believe we would have line of sight in 2014. Additionally, we are growing increasingly skeptical of management’s guidance for mobile growth as 2014 appears increasingly back-end loaded. Lastly, Broadcom’s gross margin results and guidance were slightly disappointing, particularly given the favorable mix of higher-margin products. Overall, we believe BRCM can move into the mid $30s over time, as integrated cellular platforms coalesce around the company and others (e.g., QCOM). Additionally, we now believe we are on the precipice of a massive movement toward SDN that should drive accelerated networking growth rates for arguably the proprietor of the world’s best switch-silicon portfolio.”

Glen Yeung, Citigroup: Reiterates a Neutral rating, and raises his price target to $33 from $30. “. Given Broadcom’s penchant to guide conservatively, we suspect their modestly below consensus (-5.3% vs. cons. -4.5% q/q) revenue/GM/OM/EPS guidance will not deter bulls. Indeed setting up potential for another beat is momentum in China wireless infrastructure (the best opportunity for chipmakers in 1H14), enterprise momentum (augmented by a Trident product cycle), and ultra-HD momentum. However, while Broadcom is optimistic about 2H14 outcomes for mobile and wireless (connectivity and baseband), connectivity inventory build (ostensibly at their 2 largest customers) and 3G pricing pressure (that may obviate gains made in LTE), generate concerns. For 1H14 we continue to “go with what you know” and therefore favor wireless infrastructure names (ALTR, XLNX, FSL, IDTI) and memory (MU) and are staying away from handset names (AAPL, BRCM).”

David Wong, Wells Fargo: Reiterates a Market Perform rating and a $25 to $30 “valuation range.” “Broadcom’s Infrastructure segment & Networking segment (about 28% of revenues) appears to be doing well, with 25% year-over-year growth in the December quarter and the company’s Broadband segment (about 27% of sales) appears to be stable though unexciting with sales down 2% year over year in the quarter. However, we think it is too early to be sure if Broadcom’s new LTE products will be sufficiently successful to re-ignite growth in its baseband chip line, and if the company will be able to achieve good growth from its connectivity products in the future. The Mobile & Wireless segment currently accounts for about 45% of total sales, and fell 7% percent sequentially and 7% year-over-year in the December quarter, with a further (seasonal) sequential decline expected in the March 2014 quarter. Our 2014E EPS remains unchanged at $1.30. We are introducing our 2015 EPS estimate of $1.93.”

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.